← The Wolf Of All Streets
The Wolf Of All Streets
Bitcoin Has Been Co-Opted – Jim Bianco Warns The Fed Is Losing Control
00:54:29
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- [00:00]
A
I do have in a file all of Trump's tweets from 2016 to 2020. We're the best. We're the hottest. Everybody wants to be here. Donnie from Queens, the real estate developer argument.
- [00:12]
B
Are we in a simulation, or is this actually real life?
- [00:15]
A
Lower is better. 0 is the best, and negative is even better than 0, and higher is worse.
- [00:22]
B
Is there any way that the United States can grow their way out of the current fiscal crisis? Does the Fed even matter at this point? What was up with that meeting between Trump and Jerome Powell at the Fed building? And where does bitcoin fit into your portfolio? And should bitcoiners be cheering? Institutional and government adoption. I talked about these topics and so much more with the incredible Jim Bianco. You don't want to miss this one. So I want to start by talking about a event that recently happened that you had some absolutely hilarious and relentless tweets about that I've gotten no opportunity to speak with anyone about, which is Donald Trump's visit to the Fed building. Are we in a simulation, or is this actually real life? This episode is brought to you by Binance, the world's number one crypto exchange, trusted by over 270 million users worldwide. Start your crypto journey with Binance. Binance.com Binance is not available in prohibited countries, including US. Check its terms for more information. Www.finance.com terms no, we are in a simulation.
- [01:44]
A
And this simulation is, you know, Trump and what he's doing with the. With the Fed building. It is unbelievable. Let's. Let me. Let me be serious and say, what is it he's trying to do? The Federal Reserve act says that you can fire the President, can fire the Federal Reserve chairman for cause, not at will. At will means he could do it for any reason or no reason. For cause has never been defined. It's never been adjudicated. It's believed to mean not, I disagree with you on monetary policy, but that you've done some malfeasance or broke the law or something like that. The reason the Fed building became so interesting to me go off on a little quick tangent. My name is Naval. I live in Chicago. I have relatives in the building business. Some of them do government buildings. 100% of every government building ever done and ever will be done and is currently being done, is ripe with fraud, abuse, cost overruns, and all other shenanigans. So if you want to find a reason to get rid of the Federal Reserve chairman, tie him to a $3 billion building project, I guarantee you if you look hard enough, you will find a reason that you can get rid of them for. Cause the question is, is that what Trump really wants to do or is it that he wants to just hold it over Paul's head for the next nine months? That's the open question. That's what I saw in this whole ridiculous thing about him going to the Fed building.
- [03:18]
B
I take the latter. I think it's all a setup for the predecessor. I believe that Trump is beating Powell down so badly so that he can literally implant any person he wants as the next and better superior option.
- [03:31]
A
I wouldn't disagree with that. I think, you know, that's what we refer to or Bessant coined the term the Shadow Fed and what the Shadow Fed is. Presumably by the September meeting he's probably gonna drop the name of who he wants. And if we assume that that person will be able to pass Senate approval, then the question is, I'm going to beat Powell down so much that while technically he's the Fed Chairman, no one is going to listen to him. He is such a lame duck that you're going to, you know that Fed meetings, you're going to have the new guy go on CNBC and he's going to get bigger ratings than Powell is basically what's going to happen. That's what Trump ultimately wants. Didn't fire him, gets to serve out his term, but he marginalizes him in just many different ways.
- [04:20]
B
That moment was so incredibly surreal. Tim Scott standing there without a helmet even on his head while Trump and Powell were forced to wear helmets and showed him the receipts that were completely inaccurate about the price of the building just to be able to have his gotcha moment. I've never seen anything like that or dreamed of anything like that, honestly.
- [04:39]
A
In fairness, in fairness to Trump, I'll go back to my name ending in a ball. It's a government project. Every receipt is a made up number.
- [04:47]
B
Yeah, when you're the head of the entire government. I was going to say that doesn't just apply to buildings and when you're the guy launching off meme coins just before you get, you know, inaugurated. I think that if we're going to talk about grift, it can go in both directions and I'm non political and certainly as a bitcoiner, I'm no fan of the Fed. In fact, I did an interview with Robert F. Kennedy a few months before the election and tried to convince him to say abolish the Fed in the interview, but we didn't quite get didn't quite get that far. But even in this case, it's very uncomfortable for me to watch what he's done to Powell because I do believe that there should be some independence there and that Powell should be able to finish his term in peace.
- [05:30]
A
Well, in fairness to Trump, again, now, look, I'm not trying to defend Trump. I'm just trying to present another side here. The problem with the Fed is quick history. 1986, the Fed had a proposal at one of the FOMC meetings to cut the discount rate. That's what the. That was the rate they used back 40 years ago, not the funds rate. And the chairman, Paul Volcker, was against it, but the board, the set the 12 voters voted in favor of cutting the discount rate. Volcker got up in the middle of the FOMC meeting, called Jim Baker and resigned right there within five minutes after the vote was over. Wayne angel was one of the Fed governors at the time, convinced them to come back into the room. They had a second vote and they voted the way that the Chairman wanted. Since that point nearly 40 years ago, the chairman gets what the chairman wants. So the Fed making this monster where the chairman is, basically, it is why you get these attacks on the chairman. We don't do this to the Supreme Court. Chief justice of the Supreme Court. If you don't like what John Rob, if you don't like what the Court's doing and you want to get rid of John Roberts, fine. But he's only one in nine votes. You still got the other eight votes. If the poll was one of 12 votes, go ahead, get rid of them. You haven't changed anything. And this is the problem, and this is of the Fed's making. Now, maybe what comes out of this is that when you are a Fed governor, you are appointed by the President, you are confirmed by the Senate to represent the American people, not please the chairman. And maybe they get back to doing that again. And that would actually insulate the Chairman because you're just getting rid of 12 and a half percent of the votes then instead of getting rid of 80% of the votes. When you attack Powell right now, that's the big problem that they have at the Fed.
- [07:23]
B
I think the next logical topic is to discuss whether these rate cuts that Trump is bullying Powell so aggressively about even matter. I would argue for a very long time we've been in a situation of fiscal dominance. We obviously saw when the Fed did choose to pivot at the end of last year, that interest rates actually went up. So there's certainly no guarantee that we'll see mortgages improve or interest rates drop, even if the Fed decides to cut. I would say that beyond maybe Powell being a lame duck Fed chairman, the Fed itself is becoming a lame duck agency in this current macroeconomic environment.
- [07:59]
A
Well, they might be in terms of. Just on your last point, I would tend to kind of agree with you in terms of monetary policy. But don't forget, they also have another function. They're a bank regulator. And they're definitely not lame duck when it comes to basically, you know, torturing the banking industry to doing what they want. So they still have that power as well. As far as, you know, the rate cuts, you're right. And I want to just remind everybody, the fed cut rates four times last year. 50 basis points in September, let's call that two cuts, 25 in November and 25 in December. So every time Trump rails that the ECB cut rates 10 times and this guy hasn't moved, well, actually, did he cut rates four times last year? But, you know, we're not giving accuracy points to Trump here at any point. And so what happened is, you're right, they cut rates long, rates went up. Now, the way I've argued it, trying to keep it simple, is the Fed could move rates up or down. Does the market agree for whatever reason that that's the appropriate policy? Last year, I think what happened was you had unemployment rate rise above what was called the SAHM rule that was supposed to trigger a recession or signal a recession was coming. You had a big downgrade in the quarterly employment report. The revision to the report spooked the Fed. They thought the labor market was falling apart. They cut rates. It turned out it wasn't. The economy was fine. The market said, we don't need rate cuts because all you're doing is you're taking a fine economy and you're trying to extra stimulate it, and you're potentially creating inflation, and that's why rates went up. So this mistake that Trump makes all the time by saying cut rates and the economy will boom for. First of all, he's making two mistakes. One mistake he makes is that he says, you know, we're, we're the best, we're the hottest. Everybody wants to be here. Our rates should be the lowest. Okay, that's. To be blunt, that's Donnie from Queens, the real estate developer argument. And what that means is that he says, well, look, my building is the best. Everybody wants in. They're paying top dollar to rent in my building or lease in my building. So therefore, I'm the best credit, I get a lowest interest rate. That's his argument that doesn't work with sovereign yields. The credit rating of a sovereign yield is kind of immaterial. Japan is rated A right now. We're rated double A plus. We just came off of aaa. Japan's got rates half the yield of us because credit doesn't matter. Why? Because all developed countries, central banks have a printing press. And if you buy treasury bonds, are you ever going to be worried that they're going to pay you back? No, they'll always pay you back. They will print up pieces of paper and they will hand them to you and say, look, you got paid back. Now those pieces of paper might be worthless because of inflation or devaluation, but you will get those pieces of paper. So credit risk is never the issue. The issue is growth, inflation expectations in supply. And given that I think rates, you know, I'm Talking about the 30 year now just under 5% is about where it should be. If the, if Trump gets his way and we cut rates to 1, you're going to take a booming stock market. We got meme stocks back. Has anybody seen what GoPro and an open Door are doing as some of the other ones as well? The economy's okay and now we're going to inject it with steroids. We don't need to be doing that right now. That could have an adverse effect like it did last year. By the way, he keeps yelling and screaming that the ECB has cut rates 10 times and but I would argue if you look at the 10 year yield in Germany or the 10 year yield in Italy or France, it's higher now today than before they started the first of those 10 cuts. Again, a rejection of the policy. We don't need that easy money and that's why the 10 year yield is moving up and that, that because of supply issues and everything else. So he makes this mistake. Everybody makes this mistake when it comes to interest rates that lower is better. 0 is the best and negative is even better than 0 and higher is worse. No, there is a middle ground. Your interest rate is your cost of money. It should approximate the growth of your economy. If you have a 5% growing economy, you should have 5% interest rates and I'm talking about nominal inflation plus real growth. If you have a 3% inflation growing economy, you should have 3% interest rates. If you're Venezuela a couple years ago and you have 200% inflation and minus 50% growth, you should have 150% inflation interest rates. So that's how you set sovereign yields. You don't set it on, we're the best, everybody wants to be here, so we should get the lowest rate. That's how you price the mortgage on Trump Tower. That's not how you price a Treasury security.
- [12:54]
B
I'm old enough to remember my parents having a 13% rate on their mortgage in the 80s and thinking it was low.
- [13:02]
A
Yeah. In fairness to that, back then, because we had 13% nominal growth. Now 11 of it was inflation and 2 of it was real. But that's the. If you had. Just to use that example, let's say go back to early 80s, you have 13%. That what that means is that the average investment. Throw a dart, pick an investment. The average investment will, will, will appreciate 13% a year.
- [13:25]
B
You could put money in a savings account and get that rate at that time.
- [13:29]
A
But now if the Fed is going to offer everybody 1% or 2% interest, then everybody's going to borrow to the end of time into infinity. And to use your example for just going to put an infinite amount of money into a savings account and get 11%. And that's when you wind up having way too much money into an economy. That's the risk you would have if Trump got his way and said, we cut rates to 1%. Well, money market funds are for then if you're going to cut rates to 1%, I'm going to get a banking license. I'm going to borrow $100 trillion and put it in a 4% money market fund and so will everybody else. And then you're going to wind up the old Milton Friedman dictum. And inflation is too much money chasing too few goods. Interest rates have to approximate the growth of the economy. Not down is always good and even further down is better. That seems to be the mentality that I see too much on social media right now.
- [14:24]
B
Yeah, I never thought it would happen, but I guess you could argue that Powell actually orchestrated this soft or no landing that everybody thought was a myth or impossible, and he's getting beat up for it. And I'm not a fan of how.
- [14:36]
A
Yeah, I agree, I agree. But you know, like I said, Trump is. Trump is a real estate guy. And, you know, but I've also noticed on social media too, that whenever I try to make the case for why the Fed shouldn't be cutting rates, the guys that get most agitated and really just go off on me, the worst are real estate people, because every real estate guy wants. Every real estate guy doesn't understand why any mortgage is every mortgage should be zero is basically what they think. And anything above that mortgage might not.
- [15:06]
B
Go down, as we've seen. So let Trump cut rates and see if mortgages actually go down. As you pointed out, in all of these markets, including ours, the market has not bought into rate cuts once when it came to mortgages. And right.
- [15:18]
A
By the way, I have this theory about why Trump hates Paul so much. It goes back to the first Trump administration. I'm imagining Steve Mnuchin telling him that, the Treasury Secretary back then, that, hey, you know, they have negative interest rates in Europe. And then Trump goes, well, what's the negative interest rate? That's where you take out a mortgage on your building and the bank pays you interest payment every month. And Trump is thinking himself as a real estate guy. What a wonderful idea. Why don't we have that here? Why don't we have him here? Well, Jay, Paul doesn't, doesn't like it. He's never liked them since. Yeah, he's blamed him on that.
- [15:52]
B
It's as good a theory as any that I've heard. So I think from what I'm hearing and certainly my view, nothing stops the money printer, whether it's nine months waiting for Powell to be gone or they find a different way. I think QE infinity and money printing are the only way that we grow ourselves out of this. So.
- [16:12]
A
Well, there is one. There, there is one thing that does stop the money printer. It stops the inflation. It stops everything.
- [16:18]
B
Austerity.
- [16:20]
A
It's going to be the markets itself. It's going to be the bond market in particular. Because quick word about the bond market. If you look at capital structure, right, who gets paid first is that bondholders get paid first, bond investors will always get paid, bond investors and bonds will always get funded. I'm talking about at the sovereign government level, not necessarily corporate level. Well, how does that happen? How do bond investors. Doesn't matter what the budget deficit is and everything. How is it that bond investors always get paid? Because they will take bond prices down and yields up high enough to suck all of the life out of every other market, to drag money into the bond market to basically fund the government. You don't want that because then you wind up having punishingly high interest rates. So if the money printer is going to keep going and if Trump keeps arguing what, what stops this train, he quoted Lyn Aldinism, I just invented a word there. Is that what stops this train is going to be suffocatingly high interest rates because you're going to need to borrow so much money. And let me talk to crypto guys. I would never put my money in a bond market if I'm a crypto guy. Well, wait till you see the yield we'll have to do to suck the life out of every market. To get the bond market funded, you need never want to get there. And that's the risk you face if you wind up too much money printing, lowering rates too much. Because look at Trump's argument, right? Why does he want rates down? What is his argument? Because we're paying a trillion dollars in interest costs and he says if we.
- [17:54]
B
Cut rates, not a Fed problem.
- [17:56]
A
No, that's fiscal dominance.
- [17:58]
B
That's my point.
- [17:59]
A
That's fiscal dominance. And to put that in English for everybody else, what he's saying is if we lower rates and interest rates go down and our interest costs go down, then the government could expand even larger and can borrow even more money and even more money. And then you wind up having to say, well what are we going to get all these bond buyers and they.
- [18:20]
B
Can refinance the existing debt at a lower level. Because we know that there's trillions and trillions and trillions that are, you know, I don't know, financed at two point something low, high one points to low to that could have to be refinanced at 4 or 5% if rates continue to stay this high.
- [18:37]
A
Right, exactly, exactly. And so that's, so the point is, is that the only thing that stops this train is the bond market itself by putting on suffocatingly high interest rates. We're not there now. I don't think 5% is there. Trump thinks 5% is, is suffocatingly high, but so do all real estate people. But I don't think we're there now. And I think if we continue down this road, one day we will be there and then that will be the biggest problem that we'll be facing in financial markets.
- [19:07]
B
It's suffocating the housing market certainly, which is just frozen. Is it actively non existent?
- [19:13]
A
Is it? I mean, I don't know.
- [19:14]
B
I'm just trying to sell some houses. It's not going great. So maybe.
- [19:17]
A
Well, here's the thing, here's the thing. Every moment of every day since you and I have been alive and every moment of every day that we continue to be alive, I housing will be in a crisis. And the reason is that it depends on which point of view you're talking about today. What's happening with housing is home prices are at all time highs, median home Price in the United States, like $430,000. The case Shiller index is at an all time high and all the other metrics are at all time high. So what does that mean? There's no housing crisis for homeowners, sellers of homes. There's an affordability crisis for would be homeowners that want to get out of being renters. And part of the reason why sales are down so much is that home prices are at all time highs. So that's an affordability crisis. Okay, what do we fix that? How about if home prices fall, then we have a financial crisis and you know, you know it's your biggest source of wealth and the, and the banking system goes. So if home prices go up with an affordability crisis and if home prices go down, we have a financial crisis. The housing market is perpetually in crisis. There's never a happy balance where homeowners say this is a good price for my house and home buyers say I can afford that price. We're never ever at that point.
- [20:37]
B
Let's not talk about that any further. Let's talk about what you actually do with your money at this point, considering the environment that we just discussed. Now as you mentioned, the crypto guys are going to say put it all in bitcoin. Some of them will say put it all in a bitcoin treasury company and lever it up. Some people will say buy gold. Some people will say long bonds are a great opportunity right now, like my good friend Mike McGlone. Some people will say stocks are never going to go down, so put your money there. So how do you allocate now in the current environment?
- [21:08]
A
Well, keeping in mind that let's throw in one other thing. Everything's at an all time high, right? So stocks are at an all time high except bonds. Stocks are at an all time high. Gold is at an all time high. Housing is at an all time high. Crypto effectively is at an all time high. I know the ones that matter. Yeah, ETH is close enough. It's close enough.
- [21:29]
B
The one that matters, I should say.
- [21:31]
A
Right? So everything is going up right now. So in that type of environment, just to finish off my thought, of course everybody says, well if everything's going up, then you got to buy the riskiest possible thing, as you pointed out. Why buy bitcoin? Buy a, buy a company that has bitcoin in its treasury because it's effectively a levered bitcoin play and the like. And that is where I think that the mistake is going to come is that we're over our skis, you know. And this brings me back to the great line from the original Top Gun movie Maverick. That was some of the best flying I've ever seen right up until the moment you were killed. This is some of the best investing I've ever seen with you buying levered bitcoin products and playing everything in double levered S&Ps and QQQs and or TQQQ, the triple lever QQQ and man, it is the best you've ever done until the moment you're killed. And that's the problem that you're going to have to face in this market. Now what am I doing with my money? I guess I'll answer that question. What I'm doing professionally, I am managing an active fixed income total return index called the Bianco Research Total Return Index. There is an ETF by my partners at WisdomTree. WTBN is its ticker that tracks my index. And so we are suggesting that the bond market might be a good place to be in the market. Now everybody turns their nose up on that. And let me give you the argument, not everybody. I've made the case that starting now, moving forward for several years, not now, but for several years, cash will average 4%, which is what it's done in the last year. Bonds will average 5%. They're actually up 4.9% in the last year. Stocks will average about 6ish percent going forward. Now they've averaged a lot more than that the last few years and they're about up a little over 7% in the last year or so now. Reason I think that stocks will not will only average about 6 or so. Maybe if you want to squeeze it 7% is because of the extreme valuations in the market. Doesn't mean it has to crash. What extreme valuations usually say is that when you pay up for an investment like that, you usually don't get the expected returns that you think. And that's why I think in this environment, the 4, 5, 6 environment as I've tried to call it, that cash, bonds, stocks are all going to be competitive investments to each other. And that's why I kind of entered into the space in that argument with our fixed income ETF WTBN that goes with our index. And I so I think that that's where we need to be. Now the problem is what everybody really wants to know is what's going to double by the end of the year and then what's going to double in the first half of next Year.
- [24:21]
B
End of the month, sir. End of the month. We're very, we're very impatient now.
- [24:25]
A
0Dte. How about by 4:00'? Clock? Yes, you know, or you could say end of the month because it is the day we're recording is the 29th of July. So the end of the month is less than 48 hours away. But that's that environment. Yeah, that might consist, persist, excuse me, for a little while longer, but I don't think it's going to be a good long term play. I do think that when you look at their world and 2030 or 2035, I think you're going to see that the, the market gave you 6 ish 7% returns, the stock market and you're going to say, look, even if you're, even if I'm right, that we're going to have elevated inflation. That's another argument I've been making. Like 3 ish percent inflation, 6 or 7% stocks is, is a good investment in that environment. But the problem is everybody's like no, it has to be 25. That's what they think that the stock market owes them 20 to 25% every year because that's what they got in 23 and 24. I just don't think we're going to see that continue as we go forward.
- [25:30]
B
And where does Bitcoin fit in a portfolio? Or should I reframe that? Does Bitcoin fit in a portfolio?
- [25:37]
A
Yeah, it does, but I think, you know, let me, can I, can I answer the question? Where does crypto fit in the portfolio? Yeah, because Bitcoin is a store of wealth. It doesn't look like it's going to be the medium of exchange. It's still unsure as to where the medium of exchange is going to be. By the way, I heard a great line from somebody the other day on Wall street that he thought Ethereum was something you go see a urologist for.
- [26:01]
B
I will never forget at the dead top of the last market the guy who was cutting my hair asked me what I thought about urethra. Generally the same thing. Urethra.
- [26:12]
A
Yeah, exactly, exactly. I think that as far as where I would go with Bitcoin and Ethereum, the maxi's argument that everything's going to shit and that you have to have your money and Bitcoin is demonstrably wrong because everything's at an all time high right now. It's not going to shit. And what Bitcoin suffers from is it looks like a levered, it looks like a levered Risk asset. It goes up when the stock market goes up and it goes down when the stock market goes down. Ethereum has had this massive comeback since April. I think that Ethereum's comeback since April has been driven by the Genius act and Tom Lee.
- [26:52]
B
Yeah, Ethereum got a Michael Saylor of their own, you know, so at least temporarily.
- [26:57]
A
Well, yeah, except is it his. Isn't his tool now down like 80%? His stock is down like 80%.
- [27:04]
B
I think they will. It was up 3,800%. I think now is down 80% from the peak. And I think today, you know, this will come out on Sunday, but like you said, July 29th, I think they announced a billion dollar buyback or something. So I haven't checked where it is.
- [27:17]
A
Right. So let me give you the case on the Genius Act. The Genius Act, I would argue it's better than not having it, but it's, it's not all the way there and there's a bit, there's a lot of unknowns with it. Let me. The Genius act is legitimizing stablecoins. Just to keep you. To put it simply, the problem with it is twofold. One, I do don't like the idea that the Genius act is basically putting in a class of like fully collateralized stable coins. So things like FRAX and DAI don't account and they're going to kind of kill innovation in that space. That your, that your stablecoin is basically a money market fund, right? For every, for everybody. Remember, money market funds have a $1 NAV. Stable coins have a $1 price. Money market funds are backed one for one by assets mainly Treasuries. Stablecoins are going to be backed one for one by assets mainly Treasuries. They're exactly the same thing with one huge difference. Money market funds pass through the interest on the underlying investments. Stablecoins do not. They can't by law. Right now, which was the major point.
- [28:24]
B
Of contention in the debate surrounding the Genius Act a few months ago was the industry wanted them to pass on yield or have yield included, and the government did not.
- [28:35]
A
Right. And so what you, what you've created with a, with the Genius act is you've created a money market fund with no yield in a world where you can get a 4% yield in an, in an actual money market fund. You know, this whole idea that Besant was saying $200 billion of stable coins is going to be 2 trillion. There's, there's one way that that happens, right? If you 10x the price of crypto. If you 10x the price of Bitcoin, you. You don't need 120,000 stable coins to buy one Bitcoin. You need a million to buy one bitcoin. But if that's what you're arguing, then say it. Say we think the price, say bitcoin is going to go to a million and we're going to need $2 trillion worth of stable coins.
- [29:12]
B
I think that that's a US centric view and is not entirely inaccurate. But the proliferation of stablecoins around the world in economies where people can't access dollars and now easily can, has been the main driver of growth to this point, which is evidenced by the fact that as much as we make the argument that Ethereum should go up because of stablecoin adoption, most tether is actually being transacted on Tron, which post most people forget because it's super fast, it's super cheap, and somebody says, I'm going to send you $3, download this wallet. And nobody cares what chain it's on. Obviously it's chain agnostic in their mind. They just want to quickly and cheaply send money. So unless we believe there's going to be a minimizing thirst for easy access to dollars, I don't think stablecoins are going to have a problem with growth.
- [30:05]
A
Right. I understand that argument. And tether has three years to come on shore, right?
- [30:11]
B
Yeah, they're presenting a plan, but we know they'll get there considering they've got the secretary of commerce.
- [30:18]
A
But up until now, 90% of all stablecoins are used for trading. They're not used for basically those wallet transfers that you're talking about or payments or anything like that. So the stablecoin. So the genius act is also the thing I really like about it is addressing a major issue and that is the payment system in the country is, is, is been so horribly broken.
- [30:42]
B
Come on.
- [30:43]
A
Oh. So I'll give you a great example. The dealer that I have my car with sent me an email last week and he said effective August 31, any purchases or any service that you do on your car, that they're going to charge you 3% if you use a credit card. So if you swipe your credit card to pay for your oil change, they're going to add 3% on it. So in other words, they don't want to pay the credit card fee, they want me to pay the credit card fee. In 1871, Western Union developed the Money Telegram and there was a, there's an image I tweeted this out a while ago. There was an image of a money telegram from 1871, said $300, $9 fee. $309, that's 3%. But in 1871, if you wanted to send somebody money, it would cost you 3%. But they had to put $300 of coins and currency in a saddlebag and write it to you on a horse. Today, 150 years later, if I want to send you money using a co credit card, it's 3% is what it is. That needs to be fixed. Money should be like emails or texts, a billion a second, all free. And what we really need to do to fix the payment system is then we can have, you know, consumer demand payments and consumer demand receipts. In other words, I shouldn't get paid every two weeks or every month. I should get paid every minute in my I can we agree on the price. And every minute money goes into my account, my mortgage should not be a monthly payment. It should be every minute you take money out of my account for my mortgage. Netflix should not be a monthly subscription. It should be. I just, I start watching a movie and every minute you take a penny or two or whatever, the price is going to be of a particular movie. That's the system we need. They had the capability to do that 30 years ago. And really what I think is strangling the digital economy is the payment system. And if the genius act is going to push us to fix that, hallelujah. Now what I fear is, and I heard a chief economist of a Wall street firm yesterday saying some of these things I just said about the payment system. And he said, I think stable coins are going to be like run by JP Morgan on their servers. I'm not sure that's a stable coin at that point. That's just a trap. Another tradified product. And then he said, or maybe even buy Bitcoin.
- [33:03]
B
They do that, what's it have? J.P. morgan coin. And they use it for cross border transactions. But go ahead.
- [33:07]
A
Sorry, yeah, I was going to say. And then he went on to say, or maybe run by the Federal Reserve. I'm like, wait a minute, that's a CBDC is what that is. And so what I also fear about with stablecoins is that people are talking about JP Morgan coin and basically CBDCs and they're just basically calling them stablecoins. And they're not going to be on Tron, they're not going to be on Sol, they're not going to be on Ether, not going to be on the Bitcoin network. There's going to be none of that. And so that's where I also fear that with this no interest in some of these other things that we're going to, we're basically pushing trad fi to fix the payment system of tradfi and basically kind of sidestep the whole stablecoin thing. It's not going to be a decentralized coin in one of these networks.
- [33:52]
B
I tend to agree with that. So I think that it's hard to know how it will look. But we know Citibank is coming out with Citibank Coin. They've said it right. Bank of America is coming out with bank of America coin. Coinbase just partnered with PNC to be able to use stablecoins and do trading on PNC and I think today FIs to deal with Circle so that they can incorporate stablecoins there. It's definitely departing from the ethos of the crypto native side of stablecoins and will likely be co opted and there will not be an investable opportunity there for the average person that I do fear. We get very excited about stablecoins but I'm not sure in that world that that's very exciting for your average person who's trying to find a way to make money in crypto.
- [34:42]
A
A quick aside on this. I've been following the crypto space long enough and in fact I had a conversation with somebody about this this morning that this whole conversation we're having about stablecoins sounds a lot like the exact conversation we were having about stablecoins in 21 and that we've been down this exact road before. And it all got brought to an abrupt halt with the Terra Luna debacle in May of 22 and then piling on with FTX in November of 22. And it's almost like we forgot that we've tried these arguments we're using about stablecoins. We've already tried these arguments. We were talking about them being the big push for cross border payments and all that other stuff that we were talking about that you were mentioning about with with Tether. We were having this conversation four and five years ago and it never panned out.
- [35:29]
B
Well, I think because of the pendulum swinging so far in the other direction from a regulatory and legislative perspective because of the fear of even touching crypto. I mean it was kryptonite for anybody to even talk about it after those things happen. And we conflated an algorithmic stablecoin backed by air with stablecoins that are backed by US Treasuries and they're the sixth largest buyer of US Treasuries. So I see why it took us so long. But there's a reason it paused.
- [35:59]
A
Right? I remember the days of Olympus DAO and that, you know, they were supposedly going to create a stable coin with like a 4,000% interest rate. Yeah, exactly.
- [36:11]
B
I will pose this. There is another way, I think that stablecoins become much more popular and you get to 2 trillion even without the price of Bitcoin going to a billion dollars or a million dollars, and that is with the increase in tokenized assets in general. So if we do actually see all of these institutions move forward with tokenized products, we've obviously seen blackrock with BYDL and sort of the first iterations of this. But talking about tokenized stocks becoming wildly popular and if stablecoins end up being the base currency of those transactions, they're going to be absolutely, absolutely massive. Once again, I don't know if that'll be on the JP Morgan network or Ethereum. I can't imagine that the DTCC and Citadel are going to do an open source stablecoin for transactions settling stock trades, but stablecoins will be huge.
- [37:04]
A
So let me ask you the question then. So for RWAs, what's the value proposition for an American investor? I already own Nvidia. Why do I need a token? Why do I need to sell my New York stock exchange Nvidia to buy a tokenized Nvidia? What do I get? You're telling me that the base currency is going to be a tokenized stablecoin with zero interest rate? I mean at least my cash earns me an interest rate right now.
- [37:28]
B
Well, I think there'll be ways to make interest on your stablecoin that aren't native. That will be pretty straightforward. But that aside, I think you hit on the first one which is as an American once again forgetting there's the rest of the world that can't access Nvidia stock, which I think is a massive unlock. But I think if it brings us to T plus 0 settlement and fees go down and we eliminate the third parties in between, then there could be something compelling there. And I think that's always been the promise of crypto. The problem is it's being co opted by centralized large institutions and may not be the decentralized version of that that we anticipate.
- [38:02]
A
Now the thing about, the thing about RWAs is they have to be backed one for one like a stablecoin too, you know you can't create an Nvidia token token and not, you know, and just, just start selling it. That's the old bucket shops from the 1920s.
- [38:16]
B
I mean, I'm sure people will try.
- [38:18]
A
Yeah. What you're effectively doing is you're issuing. You're. You're not Nvidia, and you are issuing Nvidia stock. If you have a tokenized asset and you don't back it one for one.
- [38:28]
B
So recently, Robinhood, in their big announcement that they were going to be offering tokenized stocks offshore, not in the United States, obviously they did some sort of giveaway or announced a giveaway where you could get stock in private companies that was tokenized. And OpenAI very quickly tweeted or wrote a letter or something. We have no idea what this is. We have not allowed Robinhood to do this. This is privately traded. What's going on here? And Robinhood obviously will be backing it with the privately held shares that they have and such. But it opened this sort of can of worms that alludes to exactly what you're talking about. Right. What will be the custodial requirements for anyone issuing those tokens, who will be able to issue them? How will they be distributed? Will we still have the same walls where it's not democratized and your average person in Nigeria can't buy it? And it's still the same American investors? A lot of these actually should be. These issues could be loosely addressed in the Clarity Act. We'll see. That's where they should be. Right in market structure. But I don't think that those legislators are ready to make those decisions.
- [39:39]
A
Exactly. And I'll just remind everybody that, you know, Nvidia is the company or is the entity that can issue Nvidia stock. You cannot have some third party, be it Robinhood or whoever, to basically invent Nvidia stock and issue it to other people. Because then you wind up destroying the float or massively increasing the supply and depressing the price or manipulating the price, if you will, of that stock. And so these are some of the issues that have to be kind of. And the question then also becomes too, what if a company says, look, I'm Apple, just to invent the name. I don't want you to do this. You know, I don't. I want to control the float of my stock. I don't want it to be out of. Out of my control, out of my handling. And remember, a lot of this is, is. Is, is voting shares. And I want to be able to have a handle on who owns These shares because I want to know what they want is how they're going to vote on various proposals that the board puts up to the, to the proxy every year. So there's a lot of issues that have to be resolved around real world assets.
- [40:48]
B
So kind of as we talk, I can tell that you're a bit critical about the original ethos of Bitcoin and Cryp, potentially what it's become. And I know that you had comments about that when the ETFs were originally launched. Right. I think you've had similar comments potentially about a strategic bitcoin reserve. I want to read you a tweet that I fired off last week that got me in a lot of trouble with bitcoiners. It ended up in like four articles that misquoted it and took it out of context. But it started a conversation I would love your opinion on. I said this, okay. Bitcoin is amazing, but it's obviously been co opted to some degree by the very people that it was created as a hedge against. Many of the most ardent early whales have seen their faith shaken, have been selling at these prices. So I got eviscerated by bitcoin maximalists because maybe I use too strong of wording with co opted. But does that align with sort of the thoughts that you've had about these products?
- [41:41]
A
Yeah, it does. And the reason is. Let me just be clear about where I've been. I have been a big fan of these products as a disruptive force for the financial market. As we were talking about with stablecoins in the payment system, the financial market is, and the banking system is in desperate need of change and disruption. And I saw these as vehicles that could do that, change and disruption. But along the way what happens is it gets caught into these bouts of FOMO and speculation, especially with bitcoin. And that all of a sudden, because the FOMO is there because the adopt, you know the word they use is adoption. But, but what they really mean is FOMO because of the ETF that everybody piles in and everybody buys it. And you give a disincentive to innovation and you give a disincentive to basically trying to disrupt the financial system. Now I'm just here for, I'm just here for number go up. I'm not here to understand where this will fit in, how this will, will, will make us, you know, a better financial system. That's why people like me tend to kind of like Ethereum a little bit better than Bitcoin. Now I'll probably get razzed for just saying that as by the Maxis, but because at least Ethereum appears to be trying to become a new version of a financial system. And I think when we get back to that goal of trying to trying to better the financial system, I'm all in on this stuff. When we lose sight of it, and I'll give you another example, losing sight on it is a Solana Sol Sol's stock price, by the way, peaked right on the inauguration. It peaked essentially when Trump rolled out his meme coin Seoul, because of pump fun and everything else. Seoul is the metric of meme coins. And I think meme coins peaked in January and Seoul peaked in January as well. It had the promise of being that competitor to J.P. morgan and the Federal Reserve and the U.S. treasury, and it kind of got lost in this meme coin mania and now it's kind of lost its way on what it's trying to do. Hopefully Tolle can get it back going in the direction he needs to get it going in to say, look, we have to be a better JP Morgan and a better Federal Reserve.
- [44:01]
B
He said exactly what you said. It was a story today. I think that he said that memes and NFTs have no intrinsic value or nonsense and was kind of dismissive of all that. Even stating obviously that he's aware that they've driven a lot of TVL and interest and usage of the chain. I tend to agree.
- [44:20]
A
By the way, trivia question for you. How many memes are on still on the Solana network?
- [44:25]
B
20 million.
- [44:27]
A
Yeah, I was going to say, I've heard it's over 10 million.
- [44:30]
B
I mean, there were 6 million launched in April, so I don't know. And that wasn't peak to your point. Trump put in the picture. There's no greater ceiling than the President of the United States launching something. So you're not doing bigger than that with meme coins. That was it there. I agree with you. But that also counts like a kid in his mom's basement who launches a meme token that never gets a single buyer.
- [44:55]
A
Oh yeah, 99% of them never trade one time.
- [44:58]
B
Yeah. So they might never trade one time. But I agree with you there. My framing that I've always had, I feel like I'm a bitcoin maximalist because I just view Ethereum and Solana, everything else, as an entirely different asset class.
- [45:11]
A
I would agree with you. And that's kind of the same thing too.
- [45:14]
B
I don't see why Ethereum is triggering to bitcoin maximalists in the same way that I don't see why buying Nvidia would be triggering into a gold bug.
- [45:22]
A
Right. Or that buying Nvidia triggers a Tesla stock owner. You know, why. Why it should matter to them either way? Because I think at the end of the day, the maximalists are FOMOs. They're basically there to say that there's this new asset class called crypto, and everybody needs to get into this, into the token or the coin that I own. Not to be thinking about a bigger picture of it. What is it trying to accomplish, what it's trying to do, where is it trying to go? It's kind of like, you know, Nvidia is a good example of this, too. My favorite thing is, whenever I meet somebody that owns Nvidia, my first question to them is, name me. What's their. What's the name of their largest product and how much does it cost and who buys it? Nobody knows. They don't care. Most of the time when I ask them, what's their largest product, their answer is it's got a $4 trillion market cap. That's what their answer is.
- [46:11]
B
Their stock. That's their largest product.
- [46:14]
A
Their stock is their most important product.
- [46:16]
B
Obviously, nothing else matters. But listen, when you get in an environment like that, shouldn't those start to be hints of top signals?
- [46:25]
A
They are. They are. And we're in. And we are there. Now that I've said that, we are getting hints of top signals. That's the problem. Right? Does that mean that we are going to peak tomorrow or we're going to peak towards the end of 26 or something along those lines? I don't know. That's why, going back to my 4, 5, 6 argument, I think that once we get through this period and we look years down the road, we're going to see a 6% return out of stocks. We're going to see a 5% return out of bonds. Bonds are going to be competitive with stocks because they're going to give you most of the stock market with less risk is what they're going to wind up in. Cash is going to give you half of the stock market, if not a little bit more, with no risk because it's a $1 nav every day. And so that's the risk that we. That's the risk that we face. Look, we've already got this. We got, you know, the FOMO going on with the crowd right now this year. Look, it's almost August and the stock market's up by 8% in the year because of the big sell off in the middle of the year and we've got everybody frothing at the mouth that, you know, it's been like this spectacular rally. Well, so far it really hasn't. It's been decent. 8% in 8 months is not bad, but it hasn't been like 23 or 24.
- [47:33]
B
I wonder what it would have been like without the tariff situation. That obviously sent that very quick V shaped recovery, but that very quick trench to the bottom.
- [47:44]
A
So let me, let me ask you this one too. I do have in a file all of Trump's tweets from 2016 to 2020. And I've been collecting all of his. I do this kind of stuff. I've been collecting, I got a, I got a program that runs every couple hours that collects all of his truth social posts. In 2016-2020, Trump tweeted hundreds of times about the stock market making all time highs. And he tweeted a handful of times about interest rates and the Fed in 2025. And truth social media, he has tweeted about 60 times about interest rates. He has had exactly three tweets about the stock market. The first one was in April when he said it was Biden's stock market because it was selling off.
- [48:34]
B
And when he said I don't care about the stock market. Right. That's not my gauge of success. We're going to rip the band aid off. Right.
- [48:40]
A
But even since then, as it's been roaring higher, he's only had two tweets that, you know, celebrating the high in the stock market. That's it. Two since April.
- [48:51]
B
How do you explain that?
- [48:52]
A
Because my theory is, is that he's like everybody else and knows that I don't want to time, I don't want to hitch myself to that mask. Mask because I'm afraid that it might go over the side by hitching myself to the Fed needs to cut rates and calling them too late. If the stock market sells off, it's Paul's fault if the stock market keeps going up. Well, I don't need to say anything. I could just say the economy's good. And so he's basically hedging himself and he's basically, yeah. Otherwise if this was Trump 1.0, he would be tweeting every day that the stock market made an all time high. Cuz that's what he did during 1 0. I think he's afraid to hitch himself to that thing right now.
- [49:32]
B
So we obviously had this major pivot in narrative. We went from Doge and sort of this austerity by another name and tariffs and external revenue services to best and saying we're going to grow our way out of this. Elon Musk left. Can we grow our way out of this debt in this situation? And why did they give up on being fiscally responsible, let's say financially responsible?
- [49:59]
A
Right. I think, you know, there's two things. Yes, you can grow your way out, but let's be clear on what growth number we're talking about. We're talking about nominal growth, we're not talking about real growth. Nominal growth is inflation plus real growth. So if you get enough inflation, you can have your what, Remember what Besson is talking about is the debt to GDP level is about 100%. We have about $36 trillion of debt. We're at about a, you know, and we're about a 37 or so trillion dollar nominal economy. So you want to get that ratio down. Well, you need the economy to grow faster than the debt and the fast, the best way to do that is inflation, otherwise known as inflating your way out of the problem that brings your debt to GDP ratio down. So to your question, can we grow our way out? Yes, we could, by having inflation. The better question is, is that, is that a desirable thing to want to shoot for? No, it's not. It's not. It's not a desirable thing at all. Remember that even in some of the polls that have been put out last in the last week, the number one issue according to the public, is still inflation. Economic issue, excuse me, is still inflation. Why is it still inflation? Isn't it down? Isn't it been, Isn't it resolved? No, because for most of the country. Let me give you a quick statistic. Bankrate.com does this thing every January and last January they said 60% of the public 60 cannot come up with $1,000 in an emergency, they got to borrow it, put it on a credit card or ask a friend for it or something like that. These people, they're not like everybody listening to us, right? We own homes, we own portfolios, we watch asset appreciation. They don't have that. They rent, they live paycheck to paycheck. If their paycheck is not rising faster than the inflation rate, they have to buy less things. Right now, according to Indeed the Employment Service, their website, they did a study last week and they still said something like 35 to 40% of the workforce is still getting raises of less than the inflation rate. Who are those 35 to 40%? They're the bottom 35 to 40%. They're not people making $5 million a year. They're people that are, that are making $35,000 a year and they're seeing that inflation rate is going up around 2 and a half, 3% and they're getting a 2% raise. So when they go to the grocery store, they look at what they have in their basket and they go, I could buy more things last year than I can buy this year. So that's why I wanted to say, yeah, you can inflate your way out of an, out of a debt problem. You might have a revolution if you're not careful, if you wind up inflating your way out of a debt problem because you really, really stick it to the bottom end of the population in terms of income and they pay a terrible price for it. And so, yeah, if you want to get the ratio down, you could do it that way, but I don't think that's the desirable way to do it. The desirable way to do it is to elect politicians that will rein in spending. But we don't do that.
- [52:55]
B
That doesn't exist. Nobody.
- [52:59]
A
Yes, I agree. They don't exist. So this is back to my Lynn Aldism again. The only thing that stops the train is going to be the bond market because ultimately you're going to be borrowing more and more from the bond market and the bond market's just going to shove interest rates to confiscatory levels and it's going to force everybody to stop what they're doing. And now when that happens is the question. Maybe it's 10 years from now or maybe it's later this year, but that's the road we're on, I think.
- [53:25]
B
Perfect place to end because we ran out of time, unfortunately, because I feel like we could have done this for four hours. Jim, where can everybody keep up with your research and follow you and make sure that they're getting all this insight on a daily basis?
- [53:37]
A
All right, couple of ways. Business one Bianco Research. That's our research business. It's an institutional research product. Biancoresearch.com Yonco Research on X Bianco Research on YouTube Jim Bianco on LinkedIn Bianco Advisors, that's that index that I managed. And WTBN is the ETF that tracks the index if you want to find out more about it.
- [53:59]
B
Jim, thank you so much. I've been following you for so long. I've seen so many interviews, but you're one of the few people hadn't had the opportunity to speak to has really lived up to all the hype.
- [54:09]
A
Thank you. I enjoyed the conversation.
- [54:11]
B
Thank you so much. We'll speak soon. That's dope.